why the City of London can win in 2022

The City of London has for decades liked to compare itself to Wimbledon, where the UK puts on a big global show in the annual tennis tournament, with or without a domestic winner.

The state of British tennis is akin to the economy; Square Mile strikes and draws an international audience, while unaware of local weaknesses, especially the pandemic-induced slowdown in daily activity.

The analogy, of course, has slipped a bit with the arrival of Andy Murray and most recently Emma Raducanu. Nevertheless, the message still resonates that Britain is excellent at hosting a global party, a country that is beating its weight.

As we enter 2022, that feeling has never been stronger in the city.

It is as if they occupy parallel universes: the city and its high towers, and the nation below, where others work and live.

This has been a strong year for investment banks, traders, hedge funds, private equity, law firms, accountants, asset managers – the list goes on. A new one is about to begin, and they are also looking forward to it, with the hope that it could be even better than 2021.

The bonuses have been satisfactory, the deal-making has been strong, the raising of capital and debt has produced, commissions have risen, mandates in the same way, and the markets, yes, they continue to deliver.

Meanwhile, people at the street level are struggling with a pandemic, climate change continues to assert its influence, traditional “brick and mortar” companies are struggling to adapt, supply chains are severely disrupted, labor shortages abound and energy prices are rising.

New work patterns

In the UK, Brexit has further prolonged the delays and increased staffing problems in some sectors. Trade with the EU has suffered. WFH, three letters that were not in common parlance two years ago – yes, if someone said they “worked from home”, the eyebrows would often rise, suspecting that they escaped – are now accepted and have a lasting impact on cities and towns centers, office buildings and transportation.

Nowhere is the lifestyle change more evident than in London, in the city itself and to the east, in Canary Wharf. Yet the partially deserted buildings and quiet sidewalks and footbridges do not reflect the city’s mood.

Of course, commercial landlords will have to switch, creating more flexible workspaces, and the companies that relied on servicing offices will suffer. But as you enter the new year, the mood in the financial and investment society is one of fingers with quiet confidence.

Covid has taught us not to take anything for granted

Even the outlook for inflation has not done much to dampen cautious optimism. After all, the use of higher interest rates to curb rising prices can provide good times for financial companies, for banks, insurance companies, asset management and investment platforms.

The notion that the city is fixed on the FTSE 100 no longer applies. Which is just as well, as the leading UK equities index will lag behind its foreign counterparts. In the US, rising stock markets have reached record levels.

This is again worth repeating, despite the emergence of a new Covid variant. The reason for the sustained rise of the S&P 500 can be proved by mentioning its leading stocks, such as Amazon, Alphabet, Microsoft, Apple, to name its top four. This compared to the FTSE-100 highest quartet of Shell, AstraZeneca, BP and Unilever.

I know where I would rather park my cash. In a way that does not matter much to the city’s underlying strength – it is a global center, the largest along with New York, which attracts investors from all over Europe, the Middle East, Africa and Asia. They can direct their American plays via London. Wall Street’s opening bell has become a key moment in British Day.

Changing tec (h) tonic plates

Nor is it very important that the tech giants belong in the United States. What has greater weight in the city is that tectonic shifts are taking place. It is a place that thrives on change, and technology, especially FinTech, is poised to reap big gains in the years to come. These will be companies that require advice, development and care. They need to secure funding. London, which is prominent in the capital markets, rubs its hands.

Yes, there has been Brexit-induced movement, but not on something like the scale predicted by the judges. At present, it was thought in some circles that there would be a drain of talent away from the city to other centers in the EU. It has not happened. This is also contrary to a lack of clarity about the post-Brexit rules on financial services.

At present, no European location has been able to meet a sustained challenge to London; they are all alike, no place has jumped out of the herd. They lack the scope, depth and breadth of the British leader.

It would be foolish to assume that a decent year is given. The city treads cautiously. Covid has taught us not to take anything for granted; the wake-up call it gave was that the world’s economic system could collapse at any moment. Two years later and we have become accustomed to living with the eruption. However, another more dangerous variant could be just around the corner, or a completely different virus.

Much of the positive buzz stems from setbacks, the lifting of lockdown restrictions and industries capable of returning to pre-Covid levels. Not everyone was so lucky – travel and aviation are still a problem. As we enter January, many countries are introducing strict rules to try to combat the proliferation of the Omicron variant.

It is uncertain how long these safeguards will remain in place and their effect on economic activity. Omicron seems less deadly, but more transferable. How it will affect staffing and companies’ ability to operate has not yet been determined. Energy prices this winter are another cause for concern.

There are those who insist that the markets are overvalued, that they have artificially taken advantage of central banks’ multi-trillion-dollar quantitative easing programs designed to support, in order to create stability. At some point, this pump will be turned off.

That’s all in the future. So far, the city can thank for a surprisingly decent year, all things considered, and welcome the coming year.

Published: December 29, 2021 at 13.11

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